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Loyalty Expo Postmortem: Evolution of an Industry

Even as companies say they plan to invest strongly in their loyalty programs this year, consumers say they are valuing them less. The need to bridge that gap is the loyalty industry’s biggest challenge, and its best opportunity.

That was my key takeaway from attending last week’s Loyalty Expo in Orlando, Florida where Bunchball was on hand as both a sponsor and presenter. As the singular annual event for any company serious about being a player in the loyalty space, I was encouraged to see so many of my peers there beating my favorite drum — the one signaling the need for the loyalty industry to boldly evolve into new models more relevant to the modern consumer.

Latest Research Highlights Need for Change

The conference keynote featured a hard look at the state of the industry with highlights from brand new market research by Forrester, SAS and Acxiom, including:

58% of brands plan to increase spending on customer retention in 2012-13 (Acxiom)

Yet most companies are still allocating less than 20% of their total marketing spend to customer retention (Acxiom)

Marketers identify “differentiation” are their top loyalty program challenge (Forrester)

And while 25% of customers feel very loyal to their preferred brands, 25% feel no loyalty at all. (Acxiom)

Is it any wonder that many loyalty strategies are seeing less than stellar results when programs lack differentiation and marketers are more concerned about driving spend that earning customer love? And aren’t those goals totally interdependent? The good news is that many in attendance agree that traditional transactional models (spend, earn points, redeem) are showing signs of fatigue and need to evolve - but to what?

Time to Shift to Loyalty 3.0

Zain Raj, author of the new book Brand Rituals, provided the perfect framing for the shift required in the loyalty space during his Monday keynote. Raj argues that true loyalty is really about shifting the brand-consumer interaction from “routine” to “ritual” — from a low-involvement interaction to one that emotionally engages the consumer. I totally agree, and made my own case for this shift in Bunchball’s session “Loyalty 3.0: How Game Thinking is Changing the Rulebook on Consumer Engagement and Loyalty.” From my perspective, Loyalty 1.0 was characterized by points and rewards, and 2.0 by 1-to-1 marketing strategies. Loyalty 3.0 is now poised to become the new dominant model and will focus on the creation of “engaging experiences” that fundamentally change the brand-customer relationship. The measure of the success of these experiences will be whether they will prove themselves worthy of a consumer’s limited and precious “attention currency.”

I see gamification as a solution uniquely primed to enable brands to create and grow those dynamic Loyalty 3.0 experiences. And judging by the interest we saw at Loyalty Expo, many brands agree. It’s an exciting time to be a loyalty marketer.

For another take on this year’s Loyalty Expo, with a shout out to Bunchball, check out Musings From Loyalty Expo by Sprocket Marketing.

As the market leader and innovator in gamification, Bunchball’s gamification solutions have motivated more than 125 million users to complete more than 20 billion actions on behalf of over 300 customers.